Germany Considers Revision of Civil Servant Pension Fund Investment Guidelines

17 January 2012 (PLANSPONSOREurope.com) – The German government is exploring ways of revising investment guidelines for civil servant pension funds, due to the downgrade of euro-area countries last week, the country’s Interior Ministry has confirmed. The move follows the downgrade of several EU countries including Austria and France.

Germany’s Handelsblatt newspaper reports two German pension funds for civil servants in the federal government may ease their investment rules for government bonds following Standard & Poor’s downgrade of the euro-area countries.

A spokesperson for Germany’s Interior Ministry told PLANSPONSOR Europe: “Civil servants' pensions are traditionally paid from public employers' current budgets as part of personnel expenses. A few years ago, the Federal Government began adding elements of a fully funded system to this financing model by creating a pension reserve. In addition, contributions to a reserve fund are being made for all civil servants hired starting in 2007; starting in 2020, their pensions are to be paid entirely from this fund.

“Details concerning the management and investment of the money in the special federal pension reserve and reserve fund are based on Sections 5 and 15 of the Act on the Pension Reserve (Versorgungsrücklagegesetz, VersRücklG). The investment guidelines also state that the funds and their returns are to be invested in federal debt securities, debt securities of the federal states and of other EMU countries, supranational organizations and government-dominated issuers, as well as covered bonds and similarly covered debt securities which, at the time of investment, had an AAA rating from the three leading independent credit ratings agencies on the international capital markets. If only two of these three ratings agencies have issued ratings for the relevant securities, then the rating they agree on is definitive.”

“Given the current developments in financial market policy, the Federal Ministry of the Interior and the Federal Ministry of Finance are discussing whether to revise the investment guidelines in light of the changed environment, and if so, how.”

PLANSPONSOREurope Staff
editors@plansponsoreurope.com